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ADB bats for higher tobacco tax

/ 10:39 PM November 13, 2012

The Asian Development Bank is backing calls for the imposition of higher taxes on tobacco products, saying the Philippines and four other Asian countries are among those that will suffer from growth in cigarette-related deaths due to government neglect.

In its report, “Tobacco taxes: A win-win Measure for Fiscal Space and Health,” the ADB said the Philippines, China, India, Thailand and Vietnam will enjoy the twin benefits of substantially reducing smoking-related deaths and generating significant additional state revenue should their respective governments raise taxes on cigarettes.

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On the other hand, without government intervention, the five countries may expect 267 million smoking-related deaths over the short term, ADB warns.

“For all five countries, increases in cigarette prices, in the range of 25 to 100 percent, would effectively reduce the number of smokers and the number of smoking-related deaths, and generate substantial new revenues,” ADB said.

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Based on its estimates, a 70- to 122-percent increase in cigarette taxes in the five countries, which may result in a 50-percent increase in cigarette prices, will cut the number of smokers by 67 million and reduce smoking-related deaths by more than 27 million.

In addition, the five countries will be able to generate $24 billion in additional revenue each year. ADB said the amount would represent a 143- to 178-percent increase in revenue generated by the governments of the five countries from cigarette taxes.

“The poorest socioeconomic groups in each country would only bear a relatively small part of the extra tax burdens, but reap a substantial proportion of the health benefits of reduced smoking,” ADB said.

In the Philippines, support for the imposition of higher cigarette taxes is on the rise. Supporters include officials from the Department of Finance, the Bureau of Internal Revenue and the Department of Health, which aim to raise revenues for the government and reduce the number of smokers at the same time.

Several bills seeking to slap taxes on cigarettes are now being deliberated in Congress.

But some cigarette manufacturers are opposing the bills, saying that higher cigarette taxes will affect the job security of workers in the cigarette industry.

For instance, the Japan Tobacco International Philippines Inc. (JTIP), which produces Winston, Mild Seven, Camel and Salem cigarette brands, believes that a rise in cigarette taxes will not curb incidence of smoking, and will only increase consumption of cheap, smuggled cigarettes which, in turn, will threaten to the viability of operations of legitimate cigarette makers in the country.

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JTIP also declared that all it wanted from legislators was a fair and equitable tax.

According to Manos Koukourakis of JTIP, he is hoping the Senate will be able to craft an excise tax bill that will be fair for all stakeholders.

“JTIP is not averse to the implementation of tax increases to generate revenues for the government. We simply believe that these tax structures should be moderate and predictable, as well as equitable, to ensure a more stable revenue flow which will attract more investment and fund more government projects,” Manos said in a statement.

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TAGS: ADB, Business, Tobacco tax
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